The Technical Picture: Can the metals hold support?

SchiffGold Gold Silver Pricing Analysis

A sizeable rally now needs time to consolidate

Exploring Finance

This article first appeared on SchiffGold.

The price analysis last month suggested that more time was needed for a sustainable rally. It concluded:

It looks like this market will turn sooner or later. Still though, support has become resistance so the market has some work ahead of itself. Medium to long-term investors should feel very confident buying at current prices, even if the price action remains choppy in the short-term

The metals market saw a strong bounce in the wake of weaker than expected CPI even though inflation is still annualizing more than 5%. The assumption is the Fed will tone down the aggressive talk. The market is now back in the lower side of the range it was stuck in for months ($1750-$1800), finishing the week at $1752. A look at the data can provide hints as to whether $1750 can hold.

Resistance and Support


Gold was recently trapped below $1700 after carving out very solid support at the level for the past two years. Regaining $1700 is a positive turn, especially with the explosiveness of the move. That said, $1800 has proven to be a much harder hurdle to hold above. At $1750, it sits right in the middle of what was once very solid support and solid resistance. A move through either could create a snowball effect.

Outlook: Neutral


Silver briefly got above $22 but was unable to hold it. Similar to gold, at $21, it now sits right in the middle of what used to be very strong support ($20) and resistance ($22). Still, getting back above $20 is a positive sign after spending several months trapped below. It needs to hold $20 to stay cautiously bullish.

Outlook: Cautiously bullish until $22 is taken out with conviction

Figure 1: Gold and Silver Price Action

Daily Moving Averages (DMA)


It’s bearish that the 50 DMA ($1684) is well below the 200 DMA ($1807); however, the size of the move suggested a mean reversion was probable (as noted last month). That reversion has occurred but run out of steam. It’s hard to get excited without a new golden cross forming.

Outlook: Neutral to Bearish

Figure 2: Gold 50/200 DMA


Silver has been leading gold in the recent move. The price even got above the 200 DMA ($21.50) and sits comfortable above the 50 DMA ($19.72). If it can build on recent gains then a golden cross could form in the coming weeks. Until then…

Outlook: Neutral

Figure 3: Silver 50/200 DMA

Margin Rates and Open Interest


Open interest was above 500k for a single day on Nov 11 before spiking back downwards. With open interest still at very low levels, there is plenty of room for the market to move up strongly if it were to regain momentum.

That said, margin rates have also come down to the lowest levels since 2020. This gives the CME plenty of room to jack up margin rates and cap any move.

Outlook: Neutral

Figure 4: Gold Margin Dollar Rate


Silver is similar to gold with Open Interest sill very low along with low margin rates. As seen in October, it does not take much for an increase in Margin to have negative effects on price.

Outlook: Neutral

Figure 5: Silver Margin Dollar Rate

Gold Miners (Arca Gold Miners Index)

The gold miners have been consistently leading the price of gold in both directions for years. The current move in the miners is stronger than it was back in August when gold even got above $1800. While the sector was very oversold, it’s a positive development that the ratio has rebounded so strongly. This means stock traders are expecting the price advance to continue.

If the GDX can break back above $30 it could be a very bullish signal for both the metal and the miners. It got as high as $28.64 this week before coming back down to close at $27.37.

Outlook: Bullish

Figure 6: Arca Gold Miners to Gold Current Trend

Looking over a long time horizon, shows how badly the miners have underperformed gold over the last decade. This shows traders have never confidently bought into any gold momentum, anticipating price advances will be short lived. When this trend reverses, gold could start flying higher being led by a surging mining sector.